7 Hidden Risks of Keeping Your Retirement Money in a University Annuity
Why leaving your money in a university annuity contract might not be the best idea.
Annuities promise guaranteed income for life—but at what cost?
If you’re nearing retirement or already retired, you may be wondering whether to keep your money in an annuity, such as a university pension account or a fixed income annuity. While annuities can reduce market risk and create predictable income, they come with drawbacks that many retirees overlook until it’s too late.
Before you commit long-term, here are seven risks of leaving your retirement savings in an annuity.
🔒 1. Limited Liquidity
Can I take money out of an annuity?
In most cases, the answer is not easily. Many annuities have surrender charges or 10+ year withdrawal schedules that limit access to your funds. For example, university pension often requires a 10-year payout schedule if you want to move your money out.
Risk: If you need a large lump sum for medical bills, home repairs, or emergencies, you may not be able to access your money when you need it.
📉 2. Inflation Can Erode Your Purchasing Power
Most annuities provide fixed payments that do not increase with inflation. Over a 20- or 30-year retirement, this could significantly reduce your standard of living.
Risk: A fixed $2,000/month payment today might feel like $1,000/month two decades from now.
🧾 3. Lower Investment Returns
Annuities offer stability, but often at the cost of long-term growth. Fixed annuities generally return less than a diversified mix of stocks and bonds.
Risk: Overconcentration in annuities could cause your portfolio to underperform—especially if inflation or market returns rise.
⚰️ 4. Little to No Legacy Value
Once you annuitize, your money typically dies with you, unless you purchase expensive riders.
Life-only annuities stop paying at your death.
Joint or period-certain annuities reduce your monthly income.
Risk: Your heirs may receive nothing, even if you pass away shortly after payments begin.
💰 5. Complex Terms and Hidden Fees
Many retirees ask: “Are annuities a scam?” While they aren’t scams, they often include confusing contracts, opaque fees, and fine print. It’s easy to miss limitations on withdrawals, investment choices, or income guarantees.
Risk: You may sign away flexibility or overpay for features you don’t fully understand.
🔄 6. Irrevocable Decisions
Once annuitized, you usually can’t change your mind. If your financial situation changes, your annuity contract likely won’t.
Risk: You lose the ability to adapt your income strategy to changing needs, markets, or tax rules.
This might be the most consequential item on the list. If you make the wrong choice on how to take your annuity, you are stuck with that decision. Make sure you understand all of the annuity options and your own personal financial situation in order to make the best decision for you and your family.
❗ 7. Over-Reliance on One Income Source
Putting the majority of your retirement nest egg into one product—especially an annuity—may reduce diversification and flexibility in your overall plan.
Risk: If your annuity income falls short or healthcare costs spike, you may not have other assets to draw from.
✅ Final Thoughts: Should You Leave Your Money in an Annuity?
Annuities can serve as a helpful foundation for guaranteed retirement income—but keeping too much of your money in an annuity can limit your flexibility, growth potential, and legacy goals.
Before you commit, ask:
Do I need access to this money in the next 10 years?
Will this income keep up with inflation?
How does this fit into my overall retirement strategy?
One possible strategy would be to leave enough money in the university annuity plan to cover your base expenses like utilities, groceries etc and then transfer the rest of your retirement money into an IRA to invest in stocks and bonds for more growth and income potential.
Pro Tip: Work with a fiduciary financial planner to review your annuity contract and retirement goals. What seems “guaranteed” today may come with hidden trade-offs tomorrow.